NEW YORK, May 6, 2014 /PRNewswire/ -- In connection with
its new business initiative Brazil Gold Corp. will be changing its
corporate name to Conexus Corporation, reflecting our broader
business interests.
Dear Shareholder:
On April 11, 2014 we made a filing
with the U.S. Securities & Exchange Commission reporting an
exciting new business initiative for Brazil Gold. As we
examined various macro issues impacting natural resources,
commodities and agriculture we identified a significant business
opportunity in beef cattle production. We have been able to
team with executives whom many years of experience in all aspects
of live animal agriculture. In connection with this
initiative we will be changing our corporate name to Conexus
Corporation, reflecting our broader business interests.
Please visit our new company website: www.conexusco.com.
Beef cattle represent a significant portion of live animal
agriculture in the United States. However, contrary to the
popular imagination the industry is largely comprised of very small
operations. As compared to the consolidation that has been
witnessed in hog and poultry operations there has been very limited
consolidation of beef cattle operations. Today there are more
than 725,000 cattle ranches in the United
States with an average herd size of slightly over 40
cows/ranch, according to independent industry data.
Since 1960, the number of hog operations has declined to 50,000
from 1,800,000 with the average hog inventory at these operations
having grown to 1,800 from 50. During the same period poultry
operations have declined to 25,000 from 2,200,000 with the average
broiler inventory having grown to 50,000 from 25. Cattle
operations have been reduced by only 20% since 1993.
The top 25 domestic cow/calf operations, as reported by
the National Cattlemen's Beef Association, represent less than 1%
of the total domestic production base of 29 million head.
We plan to establish ourselves as one of the largest beef cattle
operations in the United States on
the basis of a shared economic model that provides regular and
stable cash flow to contract cattlemen (landowners). We
expect to benefit from economies of scale, efficiencies and
operating leverage, which is not available to the small
rancher. Further, we will largely limit our use of financial
leverage to the financing of our highly liquid inventory - the
cattle themselves - without bearing the capital cost of land
acquisition and ownership.
Many of America's traditional cattle producers raise cattle as
part of their rural lifestyle and to supplement their income.
Our plan for consolidation is to offer these cattlemen an
opportunity to deleverage through the sale of the animals to
Conexus while also entering into a contract to care for the cattle
on their property for a fee. The cattleman will continue to
have cattle on their property, preserving their way of life, while
greatly reducing the operating burden and cash flow issues
associated with a small operation and receive a stable stream of
income.
Our model is to purchase animals from cattlemen/landowners for a
market price and to simultaneously enter into a contract with each
cattleman whereby the cattleman will continue to monitor the
herd. Under this contract, the cattleman will be paid a
monthly fee with an annual bonus potential. We intend to
assemble multiple production pods of 5,000 head in geographically
concentrated areas and to manage each production pod as a
unit. We will take on the responsibility of genetic
selection, providing veterinary protocols and care, designing and
purchasing nutritional inputs, marketing and transportation. We
expect that significant savings will be achieved through economies
of scale; genetic performance, consistent cattle quality and higher
cattle market weights, reduced marketing costs, transportation
savings, feed cost and other factors.
An integral and fundamental component of our business plan is to
apply a disciplined set of standard operation procedures ("SOPs")
to our operations. This will be an essential component of
fully realizing the economic benefits described above. These
SOPs will bring demonstrated best practices and operating
discipline that are difficult for a small rancher to consistently
achieve and apply on their own. The application and
management of the SOPs will be fashioned and based on the
well-developed contract grower model that is common in the hog
industry. We intend to demonstrate operating discipline
through the consistent application of best practices to areas
including: bull management, genetics, nutrition, veterinary care,
and marketing.
We have identified more than $450
of supply chain inefficiencies for each animal sold in the current
fragmented beef cattle production system. Our business model
is focused on eliminating these inefficiencies and capturing the
resulting profit and cash flow. For example, with the scale
envisaged by our business model incremental profit will be realized
through the disintermediation of at least two service providers
that are currently an important part of the market chain for the
small producer; the backgrounder and the livestock auction barn
complex.
Our focus is on cows and calves. The industry structure is
such that feedlots consolidate masses of young animals and feed
them until they reach market weight at which point the animals are
sold under contract to processors. The commodity price risk
associated with cattle production is largely experienced in this
feeding segment of the industry and not in the cow/calf stage of
production. Cows feed on grass for the majority of the
year. This grass is grown and the cattle graze on land
unsuitable for the production of cash crops such as corn, soy, or
wheat. During the winter months, or during drought the grass
is supplemented by hay. Our scale and financial resources
will allow us to purchase and store hay at favorable prices for use
during winter months, or drought.
Our geographic focus will be the central and southern states of;
Kentucky, Tennessee, Virginia, Missouri, Kansas, Arkansas, northern Mississippi, northern Alabama, eastern Oklahoma, east Texas, southern Indiana and southern Illinois.
Initially, our emphasis will be in Kentucky, Tennessee, and southern Indiana and in the tri-state corner of Kansas,
Missouri and Oklahoma. These
areas have a significant density of ranches that fit the size
criteria of 40 to 250 head and lend themselves to establishment of
multiple production pods of 5,000 head each. This geographic
area also has consistently good levels of precipitation as well as
grassland that will support a relatively high density of animals
per acre.
We look forward to updating our shareholders with our progress
as we execute the business plan associated with our new initiative
and thank you for your support. Please use our website
www.conexusco.com for any questions you may have.
Sincerely yours,
Stephen Price
Chief Executive Officer
STATEMENT OF CERTAIN RISKS
WE HAVE IDENTIFIED SEVERAL POTENTIAL CATTLEMEN AND LANDOWNERS
WHICH WILL LAUNCH OUR NEW INITIATIVE; HOWEVER, WE HAVE ONLY VERY
LIMITED COMMITMENTS, OR AGREEMENTS AT THIS TIME WITH RESPECT TO ANY
SUCH ARRANGEMENTS, AND THERE CAN BE NO ASSURANCE THAT WE WILL GAIN
THE NECESSARY FOOTHOLD TO ACHIEVE THE LEVEL OF INDUSTRY
CONSOLIDATION WHICH WE EXPECT. THE PROCESS OF INTEGRATING
RANCHES AND HERDS THROUGHOUT OUR INTENDED GEOGRAPHIC AREA MAY
RESULT IN UNFORESEEN OPERATING DIFFICULTIES AND EXPENDITURES.
WE DO NOT YET HAVE ALL OF OUR FINANCING NEEDED TO ACQUIRE A
MEANINGFUL NUMBER OF CATTLE. WE WILL REQUIRE BOTH DEBT AND
EQUITY FINANCING TO ACHIEVE OUR BUSINESS OBJECTIVES.
SOURCE Brazil Gold/Conexus Corp